All trading involves risk. Losses can exceed deposits.

Mixed results from Westpac

Westpac reported an 8% rise in its full-year cash earnings to $7.097 billion, which was marginally better than forecasted.

All trading involves risk. Losses can exceed deposits.

WBC's dividend of 88c was an increase of 4% and in-line with consensus, while the 10c special dividend was not surprising either.

Perhaps shareholders could be a little disappointed by the overall quality, with pre-provision operating profit 1% weaker than many had expected. Costs seem to be the main culprit here, with 2H cost growth up 5% year-on-year. Margins were down two basis points on the year and were a touch below expectations, although the market doesn’t seem overly concerned by this given the stock is 0.3% higher at the time of writing (10:24 AEDST).

On the plus side, return on equity at 16% is higher than ANZ and shows greater efficiencies to extract earnings from shareholder capital. There were good improvements in asset quality as well, while the bank’s capital position is the best in its sector. Earnings in its wealth management division were solid as well, up 9% half-on-half.

On the negative side, cost growth, weak earnings momentum and weaker-than-forecasted net interest margins have been talked about on the floors today. The stock is trading on 15x 2014 earnings so it’s hard to see strong upside, given it is trading on 5% premium to its peer group. If global markets continue their steady rise then we can see PE expansion; although it’s hard to see strong upside to earnings from here.

Overall the result looks OK, but is not going to shoot the lights out and is unlikely to cause a rotation out of other bank stocks. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts